A portrait of Paladino country

Steady investment in what the federal statisticians call “performing arts, museums and related activities” led to measured economic growth in the Buffalo metro area over the past decade. The cultural sector grew from about $255 million in 2001 to $355 million in 2007, an increase of 55 percent in real, inflation-adjusted dollars into the Buffalo metropolitan economy, according to new statistics from the US Bureau of Economic Analysis. For the past 20 years or so, about $6 million of the $7 million of government support for the performing arts and museums in the Buffalo area has come from Erie County government.

These numbers should lead any prudent cost/benefit analyst to say that this particular investment is a pretty compelling winner, as $6 million in county tax dollars invested leveraged $355 million in economic output. Yet notwithstanding that nearly 60-to-1 return on public investment, Erie County Executive Chris Collins has proposed slashing that investment. He had already cut it from $6 million to $5 million last year. Now he proposes to cut support to around $4 million going forward. His justification for eliminating funding for all the area’s theaters is the same as his justification for warehousing over $74 million in Obama administration “stimulus” funds in Erie County’s bank account rather than using the funds to stimulate the economy: This elected official has decided that keeping the property tax low is his priority. He wants the average Erie County homeowner, who pays $505 a year in county taxes on a house assessed at $100,000, not to have to pay $507. That $2, which he will trumpet as a taxpayer boon next year when he runs for re-election, could keep the libraries and the theaters open. That $2 could keep a few hundred people employed. But he has decided that austerity is good politics, and he will run on keeping your wallet $2 fatter, even if that means that Shakespeare in Delaware Park and many other theaters, dance troupes, small art galleries, and other components of the regional arts marketplace are shuttered.

Many property taxpayers here, mainly elderly white suburbanites and their Baby Boomer neighbors, apparently think that this is sound policy, as evidenced by the utter silence of any of their elected representatives. Neither is a peep being heard as Collins proposes to further reduce the county-wide library system’s funding by about 20 percent beyond what he cut last year.

Welcome to the land where Carl Paladino won 93 percent of the Republican primary vote. It’s a place where the loudest private-sector voices clamor against taxes, yet where the real-estate, financial and construction industries all speak eloquently, if quietly, via campaign contributions, for a never-ending stream of huge make-work construction and development projects and subsidies, all paid for with money siphoned from faraway, resented, demonized Downstate New York.

The Center for Economic and Policy Studies at Buffalo State College has done the numbers, and they bear repeating: Downstate has about 65 percent of New York’s people, but produces 75 percent of the state’s tax revenue. Upstate is the net recipient of what Downstate overpays to Albany. In this flow of funds, the flow is one-way: toward the place where Carl Paladino rails against the Albany politicians who keep sending checks this way, and his way, too.

This dependency has produced a poisonous politics where the status quo keeps getting uglier. Democrats who should be in the vanguard against suburban sprawl, who should be leading the charge for regional governance as a way of combatting the toxic isolation of the poor inside an obsolete urban boundary, instead vie with Republicans as each tries to bash government harder than the other. Paladino Country is a place where elected Democrats introduce ballot measures to downsize their county legislature but fight to maintain town board seats. The capitol city of this special place is Buffalo, where a Democratic mayor salutes developers’ plans to spend more than $100 million of public money on subsidies to retailers rather than on cleaning up drinking water sources that are so tainted that more than a third of the fish have tumors. Paladino Country is a historic place where a historic neighborhood overlooking the Niagara River may be demolished so that a privately held duty-free chain can squat on a new sea of publicly financed asphalt.

In the current political geography of New York State, Upstate, and especially the Buffalo-Niagara metro, is the place where antipathy to state government consistently polls most intensely. State government is blamed for the pervasive sense of economic decline, even though the numbers indicate that there was a modest but real economic expansion over the last decade. Manufacturing employment used to be the core of the region’s prosperity, but here, as everywhere in the Rust Belt, globalization began eroding that core as far back as the 1970s. Yet economic diversity has produced a resilient, if shrinking, workforce. It is not the best of times here, but neither is it the worst of times. Not at all.

What is true is that Upstate is a shrinking region. Population trends here are negative: by 2035, according to demographers at Cornell University in Ithaca, the 908,000 people who reside in Erie County today will number only 755,000. Population in Rochester, Syracuse, Binghamton, Utica-Rome, and in the smaller Upstate communities as well is expected to drop by anywhere from 10 percent to 35 percent, with some rural counties projected to lose over half their population just in the next decade. In Rochester and Syracuse, there is some official recognition that a trend toward shrinkage is underway; the mayor of Rochester’s 2009 “Green Plan” refers explicitly to population loss as a challenge that must be embraced rather than shunned. In Rochester, they’re talking about a 20-year plan to manage this change.

Such sobriety is sorely needed in Buffalo. But there is no such recognition of demographic reality in Carl Paladino’s hometown. That’s because a small cadre of real-estate developers, construction managers, and financiers dominate local politics and shape local perceptions. What they want the population to believe is that all is lost unless wages for public employees are cut but that simultaneously, massive construction projects must be undertaken at public expense. In Paladino Country, organized labor is a mere shadow of its former self, yet still serves as the whipping-boy. The Medicaid program for the poor is savaged as an unbearable burden though it accounts for less than five percent of local government spending. And every politician will agree with every radio talk-show host that local and state taxes are the reason for the poor state of things.

Paladino Country is where facts don’t matter as much as the angry demeanor of subsidy-grabbing developers who don’t want the locals to know that, were it not for them, the region would be better governed. The region would be less burdened by overbuilt infrastructure that is expensive to maintain. The region would probably be a lot greener, too. And the region’s real estate would be worth more if only developers stopped muscling politicians to let them, and too often pay them, to keep creating more supply in a place where demand is shrinking.

Projects and plans

There is very little demand for new housing in a metro where the population is shrinking. Yet a lethal combination of fractured, competing local governments plus a very active home-construction industry produces between four and six new housing units for every new household being formed in Upstate. That over-supply factory requires that Upstate’s old city and first-ring suburban neighborhoods be abandoned, so that newer construction can happen farther and farther out. This is known as “economic development” in Paladino Country.

The cycle of new-builds instead of re-use is also true of infrastructure, not just housing. One leading Buffalo politician thinks that a doubling of the international car and truck bridge, a $700 million project that will be funded by federal and state funds, is a necessary project, notwithstanding the lack of any bankable increase in demand for the bridge. (Were the operators of the crossing able to demonstrate a growth in demand, and thus in bridge tolls, the bridge itself would fund any market-driven increase in its capacity.) It’s bad enough that the proposed Peace Bridge expansion is a make-work project. It’s awful that bonds will be sold to fund a bridge to service petrochemical-powered cars and trucks when scientists all agree that their emissions cause climate change. Worse is that, just a mile downriver, a 100-year-old railroad bridge between a Canadian industrial area and an American industrial area, which is a logical corridor for a greener, more efficient mode of transport that will probably grow, is overlooked entirely. Why? Probably because no local politically connected developer can make any money from expanding cross-border rail capacity.

Meanwhile, another leading politician believes that the downtown Skyway bridge that crosses the Buffalo River and connects the city’s central business district with the lakeshore freeway should be demolished and replaced with a grade-level lift-bridge, at a total cost of more than $100 million. The Skyway has a certain utility: It is high enough to allow the numerous grain elevators that line the Buffalo River to be visited by the huge lake freighters that bring corn and wheat in from the Midwest, utilizing the most fuel-efficient transport system in the world.

The misperceptions in Paladino Country multiply because politicians here never rebut the terrible truth—that these hundreds of millions of dollars for ill-advised, anti-green, make-work infrastructure projects won’t always come down the pike. In a state with a $9 billion deficit today and a gap of as much as $37 billion by 2014, there is no guarantee of further funding for big projects, either good or bad. At the same time, a necessary project goes begging: The federal government long ago agreed with Canada that the two countries needed to clean up what they called polluted “areas of concern,” one of which is the Buffalo River. Today, whenever it rains in Buffalo, raw sewage gushes into the Buffalo River from 38 outfalls, otherwise known as storm-sewer pipes, that mix rainwater with the stuff we flush. While local politicians join the rant about high taxes, and salute make-work bridge and road projects, the Buffalo River festers with an unaddressed problem.

But it’s worse than that. Candidate Paladino, foe of government, blisters critics of the plan to lure big-box retail to Buffalo’s old inner harbor area with $150 million of subsidies. The money comes from a settlement with the Niagara Power Project, which produces hydropower in huge turbines whose blades are turned by the water that flows at 16 knots past Buffalo, down the Niagara River and through a series of tunnels dug through Niagara Escarpment limestone 60 years ago. When the Power Project was relicensed, the authority that runs the turbines agreed to pay the communities upriver about $9 million a year for 50 years so they could green up and clean up their waterfront areas. Part of this revenue stream—all public money, if not from a typical source—was meant to finish building out the old Canal district in Buffalo, which is where the original Erie Canal terminus is. The rest of the money was for environmental remediation. But the developer-dominated public board that controls the money hijacked it away from green projects and instead planned a suburban-style mall for Buffalo’s inner harbor—a mall meant to look like the South Street Seaport or Baltimore’s Inner Harbor, with big-box retail anchors and restaurants and $6 ice cream cones.

But the developer mentality ran into reality. The big anchor retailer Bass Pro Shops, known from David Cay Johnston’s expose in his book Free Lunch as one of the most notorious subsidy-gobblers, turned Buffalo down. So did the Swedish furniture retailer chain Ikea. Why? Because Buffalo is shrinking, not growing.

Yet even well-meaning and experienced business people and civic activists are so accustomed to the developer mentality in Paladino Country that they still buy into this notion of creating supply in the absence of demand. They persist in trying to steer a 50-year revenue stream into a suburban-style, big-box retail complex, augmented by historically themed cultural accoutrements, in a downtown that lost its relevance as a retail center when its last home-grown department store closed two decades ago. This is a downtown which has not been able to sustain an enclosed shopping mall. It is a downtown whose brief flowering as an entertainment district seems to be fading as fast as Cleveland’s ill-fated Flats District did. Today, despite the presence of more than 40,000 workers in the Central Business District, there is no place downtown where any of them, including the 3,000 lawyers practicing in Buffalo, can buy the shirts, suits, or shoes that they wear in the federal, state, and local courts that are all clustered within a few hundred yards of one another. Retail in Buffalo, as it is in Rochester, Syracuse, and even in Upstate New York’s smaller towns, has for decades been a solidly suburban affair, except for a very few village shopping districts that have withstood the onslaught of the big boxes in strip malls. The Buffalo-Niagara metro has, according to one study, between 32 and 34 square feet of retail space per capita. The Portland metro in Oregon, by contrast, has less than 10 square feet per capita. Sprawl wrecked Buffalo’s downtown as a retail destination, and now, even with $150 million of subsidy money on the table, money that should be spent to clean the waterfront, not even big-box retailers can be enticed to get in.

All over Upstate, in the statistics and in daily experience as well, there is vast, consistent, incontrovertible evidence of demographic change, but also of the corrosive effects of the wrong kind of development. Much of the demographic change is urban, as the cities continue to shrink, but the shrinkage is also rural throughout the region. There is an understandable feeling of dislocation and uncertainty, exacerbated by government policies that seem always to make more outside money available for projects that never deliver the hoped-for transformations. Could tearing down one bridge and building another across a couple of hundred feet of river really change the fate of a downtown which hasn’t had a retail district in decades? Could the urban or regional economy really benefit from the construction of an additional international bridge-span, vastly expanding a Customs and duty-free parking lot, expanding a plaza for idling diesel trucks, but bulldozing a historic neighborhood in the process?

In Paladino Country, there is ample money in public coffers that could sustain libraries and economically positive cultural amenities, but today, among current elected officials, there is no will to sustain them because of the relentlessly repeated insistence that local taxes are what ails the economy. There is money available to clean up the filthy and dangerous waters of Buffalo’s waterfront, but those who control the money insist on pushing for a retail complex in retail-resistant corner of a poor, shrinking, over-retailed region. A sturdy middle-class riverfront neighborhood might be able to weather the stresses of aging homeowners, economic hard times and ethno-cultural chafing, but it’s hard to see how its residents will maintain a sense of cohesion in the face of both gubernatorial candidates, a congressman and state legislators all saluting a bridge-expansion project for which there is no demand and that commits the region to an expensive, carbon-devouring technology that will lose the price competition to rail transport even before the project itself is finished.

But here is where reality intrudes. The 2010 Census numbers will have an impact. After the next reapportionment in 2011, there will be fewer federal and state representatives for this area. That will mean fewer outside dollars coming in to sustain either government operations or to build more of the unsustainable infrastructure that the developers and the construction managers and the financiers clamor for.

Change is upon Upstate. Shrinkage will continue. The region’s comparative advantages—namely, fresh water, cheap land, extensive pre-built infrastructure—need stewardship over the next couple of decades. What’s needed now is a leadership that understands the notion of stewardship, and that understands that economic development in the form of make-work projects is not economic development at all. Sustainability for the long term, especially as the region’s population shrinks, means accepting the new parameters.

Instead, in Paladino Country, we have developers who rail, and a political class that quails, and now, a railing developer-turned-candidate. Will the rest of New York State buy his bile, or count up the money it’s been costing them?

Bruce Fisher is visiting professor of economics and finance at Buffalo State College, where he directs the Center for Economic and Policy Studies.